Los Angeles Personal Injury Lawyer - foreclosure

Salon: Why Loan Modification Scams are Booming

Paul Kiesel — Thu, 24 Sep 2009 18:28:42 GMT

FYI: Here's a link to a blog I wrote a year ago that portends what's being described in the article below.

During the go-go years of the real estate bubble, shady mortgage brokers thrived, thanks to the sluggish response of regulators and law enforcement agencies. Amid the ruins of the crash, there's a new boom attracting unscrupulous mortgage professionals: "Foreclosure rescue" companies promising -- in exchange for a large upfront fee -- to persuade lenders to modify desperate homeowners' mortgages. And authorities are again finding themselves ill-equipped to deal with the deluge.

In a giant game of whack-a-mole, law enforcement agencies at all levels across the country have filed suit against 150 such companies, but they continue to proliferate, and the number of consumer complaints continues to rise.

"This is a very big scam," says California Attorney General Jerry Brown. "They're all over the place, and as soon as you get one, they migrate to somewhere else."

The case of one particularly aggressive firm, 21st Century Legal Services, shows just how ineffective authorities' moves against the companies often are.

Four states have sued 21st Century, and at least three more have open investigations. Over 150 consumers from more than 30 states have filed complaints against 21st Century with the Better Business Bureau. No active firm has more complaints.

Yet the company forges on. Operating under a new name, Fidelity National Legal Services, it continues to solicit consumers nationwide, even in states where authorities have won court injunctions.

Homeowners do not have to pay a company to negotiate on their behalf: They can always contact their mortgage servicer directly for a loan modification, at no cost. But consumers often find the process frustrating. For those who want guidance, nonprofit housing counselors approved by the Department of Housing and Urban Development will help for free.

Consumers should especially be wary of companies charging upfront fees or touting guarantees. The Illinois attorney general says that her office has yet to see any such company operate within the boundaries of state law.

Click here for the rest of the article.

Originally posted at InjuryBoard by Paul Kiesel

Lucrative Fees More Attractive to Loan Servicers than Modifications

Paul Kiesel — Tue, 04 Aug 2009 16:21:32 GMT

From The New York Times:

This week, the Obama administration summoned mortgage company executives to Washington to demand they move faster to lower payments for homeowners sliding toward foreclosure. Treasury officials called on the companies to hire and train more people quickly to field applications for relief.

But industry insiders and legal experts say the limited capacity of mortgage companies is not the primary factor impeding the government’s $75 billion program to prevent foreclosures. Instead, it is that many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans.

Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.

“It frustrates me when I see the government looking to the servicer for the solution, because it will never ever happen,” said Margery Golant, a Florida lawyer who defends homeowners against foreclosure and who worked in the law department of a major mortgage company, Ocwen Financial. “I don’t think they’re motivated to do modifications at all. They keep hitting the loan all the way through for junk fees. It’s a license to do whatever they want.”

For the rest of this article, click here.

For another article on Loan Modification Scams, click here.

Originally posted at InjuryBoard by Paul Kiesel

L.A. Times: Real Estate Reality

Paul Kiesel — Mon, 26 Jan 2009 16:35:30 GMT

From the Los Angeles Times:

As lawmakers look for a way out of the recession, it's worth remembering how we got into this mess in the first place. The collapse of the housing market sucked trillions of dollars worth of real estate wealth out of the economy, starting a vicious cycle of cutbacks by consumers, lenders and businesses. But the collapse wasn't a one-time event. It's an ongoing process that could take a larger human and economic toll this year than it did in 2008, when the number of troubled homeowners nearly doubled from the year before. According to RealtyTrac, lenders made foreclosure filings on 2.3 million properties last year (more than half a million in California alone), including nearly 2% of all housing units. New laws here and in several other states reduced the pace of foreclosure filings, but they haven't helped homeowners pay their bills. As a consequence, the FDIC projects another near-doubling of housing misery, with 4.4 million mortgages falling 60 to 90 days past due by the end of 2009.

It's no coincidence that more banks are sliding toward insolvency as defaults mount. The financial industry placed a huge bet on Americans paying their mortgages, along with an intricate web of side bets on the U.S. housing market. Keeping more homeowners out of foreclosure could help end the sickening slide in home values, solidifying the ground under the financial industry and coaxing more buyers back into the housing market. It's not as simple as that, of course; rising unemployment has become a major factor in the market, driving more homeowners into default with no hope of recovery. Still, if lenders don't do more for those whose homes could be saved, the situation will only get worse. Some argue that government should let the market take its course. More banks are modifying loans for buyers who can afford somewhat reduced monthly payments, and repossessing homes from buyers who shouldn't have received loans at all. Foreclosure, they say, is a fitting resolution for such people and the lenders that encouraged them. We agree that rescuing people and businesses from their own risk-taking poses a significant moral hazard. That's why we believe that policymakers shouldn't try to shield borrowers or banks from drastically lower property values and lost returns. But government can and should help them adapt to the collapsing market. Given the links between the wave of foreclosures and the overall health of the economy, everyone fares better when lenders and homeowners can strike deals that cost less and preserve more of a home's value than a foreclosure sale would.

Finding the right way to help borrowers, however, is a tricky business. Congress' biggest initiative, the Hope for Homeowners program, was supposed to refinance 400,000 defaulting loans into government-guaranteed mortgages over three years. In its first three months, it received only 412 applications and provided a grand total of 17 loans. The near-complete disinterest in the program stems from the restrictions and fees that Congress imposed to limit the cost to taxpayers -- a penny-wise, pound-foolish strategy. Meanwhile, lenders' early efforts to help borrowers fared poorly, with a high percentage defaulting again on their mortgages. But more recent efforts, such as the FDIC's handling of defaulting IndyMac Bank loans and Fannie Mae's modification of loans bought from investors, show that 60% or more of the borrowers in trouble can be rescued with the right set of terms.

Those successes and failures help draw the outlines of the right response to the foreclosure problem. Lenders need to follow the lead of the FDIC, Bank of America and JPMorgan Chase in setting affordability formulas that enable them to reevaluate borrowers and modify mortgages on a mass scale.

For the rest of the article, click here.

Originally posted at InjuryBoard by Paul Kiesel

Rep. Maxine Waters of California: The Banking Industry "Has Owned this Congress Far Too Long"

Paul Kiesel — Sun, 25 Jan 2009 22:58:29 GMT

There is a fight building over judges' roles in altering loan terms on mortgages that are either unaffordable or that were structured improperly from their origination.

Congressional Democrats say the quickest way to save homeowners is to let them declare bankruptcy and allow the judges to dictate new mortgage terms.

This seems to be a practical approach to a terrible problem that is engulfing most of the country. (Most Americans can name at least one person who's going through either foreclosure, in an "underwater" mortgage, live near foreclosed homes or going through their own foreclosure.) However, the banking industry, led by 10 groups representing the lending industry and other businesses are "fighting back fiercely," according to MSNBC.com.

The groups collectively spent $83 million in lobbying throughout 2008 and shows how strong of a hold the banking industry has had on Congress throughout the George W. Bush administration.

Congresswoman Maxine Waters (D-CA), who backs the bankruptcy proposal being touted by her fellow Democrats, has said repeatedly that the banking industry "has owned this Congress far too long."

Additionally, President Barack Obama told Democratic leaders on Friday that he also backs the congressional Democrats' mortgage term modification plan.

Foreclosure Exposure

Paul Kiesel — Fri, 23 Jan 2009 19:30:38 GMT

What are the foreclosure numbers nationwide? It appears nobody knows the exact numbers, but many fear it's much greater than what's been reported.

Below is an article from CNNMoney that discusses the problems with the numbers that have been reported. Keep in mind, there is a wave of foreclosures that will take place during the first half of 2009, due to prime borrowers facing interest rate resets on pay-option ARM loans (loans that were originated in 2006 and 2007). This will result in higher foreclosure inventory and a slower recovery from all of the foreclosures that occurred in 2008.

Click here for an article that discusses and prognosticates California's looming second foreclosure flood and click here for anyone who needs information about protecting one's self, if he or she chooses to attempt a loan modification with their lender.

From CNNMoney

Housing might be in worse shape than we think.

There is probably even more excess housing inventory gumming up the market than current statistics indicate, thanks to a wave of foreclosures that has yet to hit the market.

The problem: Many foreclosed homes and other distressed properties that are now owned by banks have yet to be listed for sale. The volume of this so-called 'ghost inventory' could be substantial enough to depress already steeply falling prices when it does go on the market.

"That's not good news," said Pat Newport, an analyst with IHS Global Insight. "[Excess] inventory is the biggest problem in housing these days, and it leads to lower housing prices, which leads to more foreclosures."

RealtyTrac, the online marketer of foreclosed properties, recently discovered that it has far more foreclosed properties listed in its database, which the company compiles using courthouse records, than there are listed in the multiple listing services (MLS) maintained by real estate agents.

RealtyTrac looked at listings in four states, California, Maryland, Florida and Wisconsin, and found that they contained only a third of the foreclosures it has in its database.

The scope of the problem isn't clear, but it could be huge considering that RealtyTrac has a total of 1.5 million bank-owned properties on its site.

"Many properties that should be listed on the MLS are not listed on the MLS," said Lawrence Yun, chief economist for the National Association of Realtors (NAR).

Underestimating inventory

The National Association of Realtors calculates official housing inventory statistics using data from the multiple listing services. By that measure, there were 4.2 million existing homes for sale in November, an 11.2-month supply at the current sales pace, up from a 10.3-month supply in October.

But now it seems quite possible that these figures, which are already at record highs, are underestimating the situation. And if that's the case, it could take much longer for the housing market recovery than analysts currently expect.

Until supply can be brought down to a more normalized level of six to seven months, home prices will continue to come under pressure, according to Yun.

"It could be a worse problem than we think," he said.

L.J. Jennings, a real estate broker with Pyramid Real Estate and Investments in Oakland, Calif., sees plenty of evidence that it is.

"There are a number of properties in my area that have actually been taken back by the banks, but have not hit the market yet," he said. "Once a bank repossesses a property, in some cases, it can take more than six months to hit the market."

He cites a handful of examples offhand, including a single-family home in Richmond seized in early October, a condo in San Ramon taken back the same month and a four-family building in Oakland that was repossessed in July.

"Either lenders are overwhelmed and can't get these properties back on sale quickly" said RealtyTrac spokesman Rick Sharga, "or they're deliberately slowing down."

Why there's a delay

The chief problem is probably system overload: Lenders are just not prepared to handle the sheer numbers of foreclosures that they have on their books. Banks took back about 860,000 in 2008 - more than twice the number in 2007 - according to RealtyTrac. Before the housing crisis hit, it took only about a month to get a bank-owned foreclosure on the market.

Lenders still insist they try to act as swiftly as possible. According to Tom Kelly, a spokesman for Chase (JPM, Fortune 500) Mortgage, their goal is to cut their losses on these homes, which are expensive to maintain, as fast as possible.

But banks might hold back listings in areas where they already have lots of homes for sale in order to avoid flooding the market, according to Michael Youngblood, a financial analyst and founder of Five Bridges Capital, an asset management company.

"If lenders have a significant number of properties in a limited area, they may want to stagger putting them back on the market," he said.

Eve Alexander, a real estate broker with Buyers Broker of Florida in Orlando, attributes the delays to the general malaise that's overtaken the lending industry as it's imploded.

"I think banks are dragging their rears about doing just about everything," she said. "They have so much going on, and there's so much red tape and the people don't care, nothing gets done."

There are also batches of bank-owned homes that don't appear on the multiple listing services because lenders are trying to sell them via bulk and auction sales to investors as well as individuals, according to John Mechem, public affairs director for the Mortgage Bankers Association.

He adds that it's also taking much longer to get many foreclosed homes in decent enough shape to put on the market. (see This home for sale stinks.)

Bank-owned properties are in worse condition than ever because the foreclosure process is taking longer than ever. As much as a year can pass between the time a borrower first misses a payment and the final auction sale, according to Youngblood. During that time, houses often deteriorate because owners have neither the money nor the incentive to maintain them. Some disgruntled homeowners may even deliberately damage homes before they leave.

"According to our servicing folks, it's taking more time for lenders to get properties in saleable condition," said Mechem.

The phenomenon of a growing ghost inventory doesn't promise to get better anytime soon, as long as the rate of foreclosures continues to ravage the market. There were more than 3.1 million foreclosure filings in 2008, according to RealtyTrac.

Said Sharga: "I don't see how we can avoid another 3 million in 2009."

Originally posted at InjuryBoard by Paul Kiesel

WaMu in 2003: Five Years from Now You're Not Going to Call Us a Bank

Paul Kiesel — Mon, 05 Jan 2009 19:51:32 GMT

Last week, The New York Times concluded its series titled "The Reckoning," a behind-the-scenes expose of several mortgage industry companies, players and employees whose business plans and myopic philosophies would lead the industry to a calamitous and costly fall, throughout all of 2008.

One article from the series stood out in particular, because the company being examined, Washington Mutual (WaMu), acted as if it was above or exempt from previous, decades-old mortgage industry standards, like verifying a loan applicant's income. Other companies were keen to the avarice that WaMu displayed, too, but none showed the stark contrast between the steady growth of a company, like WaMu, over a hundred-year period (the smart decisions that were made between 1889 and 1999) and its precipitous decline over a two-year period (the bad decisions made from 1999-2004 and the really bad decisions made from 2005-2007).

Below is the first part of the article:

The Reckoning

Saying Yes, WaMu Built Empire on Shaky Loans

By PETER S. GOODMAN and GRETCHEN MORGENSON

“We hope to do to this industry what Wal-Mart did to theirs, Starbucks did to theirs, Costco did to theirs and Lowe’s-Home Depot did to their industry. And I think if we’ve done our job, five years from now you’re not going to call us a bank.”

— Kerry K. Killinger, chief executive of Washington Mutual, 2003

SAN DIEGO — As a supervisor at a Washington Mutual mortgage processing center, John D. Parsons was accustomed to seeing baby sitters claiming salaries worthy of college presidents, and schoolteachers with incomes rivaling stockbrokers’. He rarely questioned them. A real estate frenzy was under way and WaMu, as his bank was known, was all about saying yes.

Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer.

Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved.

“I’d lie if I said every piece of documentation was properly signed and dated,” said Mr. Parsons, speaking through wire-reinforced glass at a California prison near here, where he is serving 16 months for theft after his fourth arrest — all involving drugs.

While Mr. Parsons, whose incarceration is not related to his work for WaMu, oversaw a team screening mortgage applications, he was snorting methamphetamine daily, he said.

“In our world, it was tolerated,” said Sherri Zaback, who worked for Mr. Parsons and recalls seeing drug paraphernalia on his desk. “Everybody said, ‘He gets the job done.’ ”

At WaMu, getting the job done meant lending money to nearly anyone who asked for it — the force behind the bank’s meteoric rise and its precipitous collapse this year in the biggest bank failure in American history.

On a financial landscape littered with wreckage, WaMu, a Seattle-based bank that opened branches at a clip worthy of a fast-food chain, stands out as a singularly brazen case of lax lending. By the first half of this year, the value of its bad loans had reached $11.5 billion, nearly tripling from $4.2 billion a year earlier.

Interviews with two dozen former employees, mortgage brokers, real estate agents and appraisers reveal the relentless pressure to churn out loans that produced such results. While that sample may not fully represent a bank with tens of thousands of people, it does reflect the views of employees in WaMu mortgage operations in California, Florida, Illinois and Texas.

Their accounts are consistent with those of 89 other former employees who are confidential witnesses in a class action filed against WaMu in federal court in Seattle by former shareholders.

According to these accounts, pressure to keep lending emanated from the top, where executives profited from the swift expansion — not least, Kerry K. Killinger, who was WaMu’s chief executive from 1990 until he was forced out in September.

Between 2001 and 2007, Mr. Killinger received compensation of $88 million, according to the Corporate Library, a research firm. He declined to respond to a list of questions, and his spokesman said he was unavailable for an interview.

During Mr. Killinger’s tenure, WaMu pressed sales agents to pump out loans while disregarding borrowers’ incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients.

WaMu gave mortgage brokers handsome commissions for selling the riskiest loans, which carried higher fees, bolstering profits and ultimately the compensation of the bank’s executives. WaMu pressured appraisers to provide inflated property values that made loans appear less risky, enabling Wall Street to bundle them more easily for sale to investors.

“It was the Wild West,” said Steven M. Knobel, a founder of an appraisal company, Mitchell, Maxwell & Jackson, that did business with WaMu until 2007. “If you were alive, they would give you a loan. Actually, I think if you were dead, they would still give you a loan.”

JPMorgan Chase, which bought WaMu for $1.9 billion in September and received $25 billion a few weeks later as part of the taxpayer bailout of the financial services industry, declined to make former WaMu executives available for interviews.

JPMorgan also declined to comment on WaMu’s operations before it bought the company. “It is a different era for our customers and for the company,” a spokesman said.

For those who placed their faith and money in WaMu, the bank’s implosion came as a shock.

“I never had a clue about the amount of off-the-cliff activity that was going on at Washington Mutual, and I was in constant contact with the company,” said Vincent Au, president of Avalon Partners, an investment firm. “There were people at WaMu that orchestrated nothing more than a sham or charade. These people broke every fundamental rule of running a company.”

CLICK HERE FOR THE REST OF THE ARTICLE.Originally posted at InjuryBoard by Paul Kiesel

Home Loans Past Due or in Foreclosure in California: 1-in-9

Paul Kiesel — Fri, 05 Dec 2008 17:58:01 GMT

The biggest economic news of the day had to be America's economy shedding over 500,000 jobs last month, a number that has not been exceeded in one month in 34 years. However, below are two statistics that show other troubling news (and a sign that the economy, because of continued job loss and distressed homeowners, will continue on its declivitous path for several more months) that was largely overlooked due to the former news and building political tensions surrounding the possibility of an "auto bailout."

Home loans past due or in the foreclosure process in the U.S.: 1 in 10.
Home loans past due or in foreclosure in California: 1 in 9.

California has had more homes in the foreclosure process throughout all of 2008. According to the Mortgage Bankers Association, 3.9% of all homes in the state face foreclosure, compared with 2.97% of homes nationally.

MBA economist Jay Brinkmann said the national trends still reflected intense problems with adjustable-rate subprime mortgages in California and Florida.

"Prime and subprime ARMs continue to have the highest share of foreclosures, and California and Florida have about 54% and 41% of the prime and subprime ARM foreclosure starts, respectively. Until those two markets turn around, they will continue to drive the national numbers,” Brinkmann said.

Naturally, the MBA blamed the sagging economy and rising unemployment for worsening the crisis that began with the abandonment of traditional lending standards during the housing boom. The group said its survey covered more than 80% of the home loans in the country.

With half a million more people out of work, the mortgage meltdown will get its exacerbated push into the second round, where we'll see the prime "Pick-a-Payment" Option ARM loans (which were littered with TILA violations) have interest rate resets, forcing hundreds of thousands of homeowners to default or go into foreclosure.

Originally posted at InjuryBoard by Paul Kiesel

Obama Names Economic Dream Team

Paul Kiesel — Mon, 24 Nov 2008 15:28:02 GMT

Earlier today, at a press conference in Chicago, President-elect Barack Obama called for "sound judgment and fresh thinking" in addressing the nation's economic crisis, which he described as a situation of "historic proportions." He then named his top White House economic team, prompting many in the press, based on Obama's selections, to label the group that will push forward Obama's policies and vision, "The Obama Economic Dream Team."

Here is the list of players with some biographical information:

Timothy Geithner: Treasury Secretary (will need to be confirmed by the Senate)

Mr. Geithner is currently the president of the New York Federal Reserve who worked very closely with Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke to facilitate the Wall Street financial bailouts of the past year.

Larry Summers: Director of the National Economic Council.

Mr. Summers, a former Treasury Secretary (for the last year and a half of the Bill Clinton administration), is currently the Charles W. Eliot University Professor at Harvard University's Kennedy School of Government.

Christina Romer: Chairwoman of Obama's Council of Economic Advisers

Ms. Romer has been an economics professor at the University of California at Berkeley, since 1988. This selection might later on be hailed as one of the more important advisory appointments that Obama made in his days leading up to taking office. Why?

Ms. Romer's e early work focused on a comparison of macroeconomic volatility before and after World War II. Romer showed that much of what had appeared to be a decrease in volatility was due to better economic data collection.

She has also researched the causes of the Great Depression in the United States and how the US recovered from the depression.

This sort of erudite individual can make a substantial impact on Obama's economic policy and her background in and heavy research of the economics surrounding the Great Depression is very applicable to the current financial state in the country.

Melody Barnes: Director of Domestic Policy Council

Ms. Barnes, an attorney and Executive Vice President for Policy at the Center for American Progress, has been serving on the advisory board for President-elect Barack Obama's presidential transition team.

Originally posted at InjuryBoard by Paul Kiesel

Interim Head of Government Bailouts, Neel Kashkari, Called a "Chump" by One Congressman, While Another Compares Him to Mel Gibson

Paul Kiesel — Fri, 14 Nov 2008 19:09:16 GMT

Neel Kashkari, the interim head of the Troubled Asset Relief Program (aka the Treasury Department's $700 billion financial rescue plan or TARP), came under heavy fire today at a House Oversight and Government Reform subcommittee hearing, after Maryland Democrat Elijah Cummings got his chance to ask Kashkari questions relating to an expanded $154 billion that was given to American International Group Inc. (AIG) this week, even though AIG still plans on setting aside $503 million in compensation for executives.

Cummings asked Kashkari, "I'm just wondering how you feel about an AIG giving $503 million worth of bonuses on the one hand, and accepting $154 billion from hard-working taxpayers? [And] what really bothers me is all these other people lining up. They say, well, is Kashkari a chump?"

Kashkari responded by telling the panel he was "outraged" that AIG will do this, but he then said he recently learned that AIG has set aside money in order to eliminate an incentive to leave the insurer.

"I'm not defending it," Kashkari said. But, in actuality, he had done just that.

After Cummings prodded Kashkari further, and laid a minor guilt-trip on him, explaining that families, due to the economic situations that many in the country currently face, will "probably be sitting under the Christmas tree with no presents" this year due to his decisions inadvertently determining consumer behavior, Dennis Kucinich, the chairman of this subcommittee, repeatedly interrupted the Treasury official during the more than two-hour session.

Kucinich harshly criticized Treasury Secretary Henry Paulson's decision this week to abandon the TARP's original intent of purchasing toxic mortgage assets from financial firms.

"The secretary just essentially took some scissors and cut it out and threw it away [. . .] Maybe this is some kind of game to some people in the administration," Kucinich said. "They're [Bush's Administration] on their way out of office and they just feel they can do whatever they want."

Is Kashkari a Chump

Kashkari reitterated to the subcommittee that his department isn't in charge of bank oversight, and that financial regulators are more concerned with bank using this capital to increase lending.

The top Republican on the subcommittee, Darell Issa (R-CA), chided Kashkari saying that his efforts have done little to help families stay in their homes. "It's very clear that the Treasury cannot and will not make the effort to keep people in their homes."

After further accusations by some other members of the committee, California Republican Brian Bilbray, with an absurd veneration, compared Kashkari to Mel Gibson's character from Braveheart, "I guess you sort of got a taste of how Mel Gibson felt in the last scenes of 'Braveheart' [. . .] You're probably the best spokesman the administration has [and] you've come across with more credibility than anyone else that I've heard."

Originally posted at InjuryBoard by Paul Kiesel

Rep. Barney Frank: No "Free Rides" for People Facing Foreclosures

Paul Kiesel — Thu, 13 Nov 2008 16:22:00 GMT

House Committee on Financial Services Chairman Barney Frank noted yesterday that a bailout program for troubled homeowners is needed to prevent the foreclosure crisis from spinning out of control. However, he also emphasized that not all borrowers should be rescued.

"Diminishing foreclosures is an important part of getting out of this [crisis]," Rep. Frank said in an opening statement at a Congressional hearing focused on what banks were doing to modify loans and further assist borrowers facing foreclosure, while adding that taxpayer money should not provide a "free ride" to people facing foreclosure, and warned that aid should not go to homeowners who should have never been in a mortgage to begin with.

"There is, in my judgment, zero likelihood that taxpayer dollars will go to those who should have never have had loans in the first place," Rep. Frank said.

Banks, like Bank of America, Citigroup and JP Morgan Chase, have started programs to modify loans for borrowers that are in danger of being foreclosed on. However, all of the programs have certain criteria that need to be met in order for a borrower to qualify (i.e. being in default; which is problematic because it could encourage frustrated borrowers who are in underwater mortgages, and who are not behind on their payments, to default in order to receive a loan modification) and the loan modification programs also appear to be overly streamlined, so it remains to be seen if the loan modification programs being offered by the banks will provide desirable results.

And even with the banks tackling the foreclosure crisis with their own loan modification programs, Mark Zandi, chief economist for Moody's Economy.com, estimates that 1.6 million Americans will lose their homes this year through foreclosure or distressed sale. Zandi, who was not at Rep. Frank's hearing, has also stressed for the past year (at least since December 2007) that another 1.9 million families will their homes in 2009, regardless of wide-scale loan modification programs.

Originally posted at InjuryBoard by Paul Kiesel